Homework Help is Here – Start Your Trial Now!
Business
Finance
1. What is the role of digital analytics in the long term to increase shareholder wealth? What are the risks and how are they mitigated?

1. What is the role of digital analytics in the long term to increase shareholder wealth? What are the risks and how are they mitigated?

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
See similar textbooks
icon
Related questions
Question

Please help to answer the attached question.

1. What is the role of digital analytics in the long term to increase shareholder wealth? What are the risks and how are they mitigated? What can cash dividends achieve but what share repurchase cannot do? Explain 3. PT ABC has assets with a market price of Rp. 112 billion and zero-coupon bonds with a nominal value of Rp. 100 billion. Risk free rate of 5% / year compounded continuously. The company has 2 project options that one should choose. The Galaxy project has an NPV of Rp. 12 billion and the Titanium Project has an NPV of Rp. 16 billion. If the company's board of directors chooses the Galaxy Project, the standard deviation of the company's return on assets will increase to 48% / year. Conversely, if the company's Board of Directors chose the Titanium Project, the standard deviation of the company's asset return would drop to 22% / year. Hint: Use the Black Scholes Model to calculate the value of equity as a European call option. Firm value consists of the value of existing business plus new business value (present value of growth opportunities) Question: a) What is the value of equity and debt if the Galaxy Project is selected? b) What is the value of equity and debt if the Titanium Project is selected? c) If you are the owner of the company, which project will you choose? Explain
Transcribed Image Text:1. What is the role of digital analytics in the long term to increase shareholder wealth? What are the risks and how are they mitigated? What can cash dividends achieve but what share repurchase cannot do? Explain 3. PT ABC has assets with a market price of Rp. 112 billion and zero-coupon bonds with a nominal value of Rp. 100 billion. Risk free rate of 5% / year compounded continuously. The company has 2 project options that one should choose. The Galaxy project has an NPV of Rp. 12 billion and the Titanium Project has an NPV of Rp. 16 billion. If the company's board of directors chooses the Galaxy Project, the standard deviation of the company's return on assets will increase to 48% / year. Conversely, if the company's Board of Directors chose the Titanium Project, the standard deviation of the company's asset return would drop to 22% / year. Hint: Use the Black Scholes Model to calculate the value of equity as a European call option. Firm value consists of the value of existing business plus new business value (present value of growth opportunities) Question: a) What is the value of equity and debt if the Galaxy Project is selected? b) What is the value of equity and debt if the Titanium Project is selected? c) If you are the owner of the company, which project will you choose? Explain
Expert Solution
steps

Step by step

Solved in 3 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Procedural Coding: CPT and HCPCS
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS